Andris SKELE, Chairman of the Latvian People's Party and former Prime Minister

The post-independence period - a period of transformation in the Baltic States

The fall of the Berlin Wall and the subsequent restoration of independence in Central and Eastern European countries changed the map of Europe once again. We hope that this time it has been changed for good. The three Baltic States - Latvia, Lithuania and Estonia - restored their independence after 50 years of Soviet occupation. This happened shortly after the fall of the Berlin Wall, and it was a turning point in the collapse of the Soviet empire, as well as in the rebirth of democracy in Russia.

The restoration of independence and the establishment of statehood occurred differently in the Baltic States than in other Central and Eastern European countries. The process of change was more complicated in terms of domestic and foreign policy. Many people in Russia have longed to keep the Baltic States within Russia's sphere of influence, even years after independence was restored. Since 1990, the Baltic States have undergone a very intensive period of transformation. The most important achievement has been a shift in the scale of values in society. Protection of human rights and establishment of democracy - these were the cornerstones of the emergence of the new countries. The Baltic States were once countries that were hidden and locked away behind the Iron Curtain, but today they have formed open societies. These are societies which respect the values of the civilised world and are prepared to make their own contributions to the global effort to establish peace, justice and welfare.

There have also been critical changes in terms of economic restructuring in the Baltic States. During the Soviet period, trade among the three republics was minimal - trade mostly took place between Russia and the individual Baltic republics. This meant that the economies of Latvia, Lithuania and Estonia developed in separate ways, and the mutual and comparative advantages which could have existed did not. Since 1990, however, trade among the Baltic States has increased very significantly, as has the integration of the three economies. The economies of Latvia, Lithuania and Estonia have successfully transformed into open market economies, and they are now competing against the economies of other countries in the world.

Increasing processes of globalisation and integration are presenting the Baltic States with new challenges and opportunities. These are opportunities which can only be described with the word "historic".


EU enlargement - a historic "window of opportunity" for the Baltic States to return to the European club of countries

The enlargement of the European Union represents a historic opportunity for the Baltic States to return to the community of European countries to which Latvia, Lithuania and Estonia have belonged for centuries. The process marks a unique opportunity for the societies of the Baltic States to catch up with their neighbours, and to open up the gates for 50 years of accumulated European heritage. The ideas which Robert Schuman presented about a unified Europe can today be implemented at a totally new level of quality.

In 1995, Latvia, Lithuania and Estonia concluded the so-called Europe Agreement with the EU, and this set out a foundation for further reforms and restructuring so that the three countries could draw closer to the EU. The Europe Agreement speaks to trade liberalisation, lower customs barriers and increased market access. As a result of the agreement, Latvia is seeing increasing trade with the EU each year, and today the EU is the leading trade partner for all three Baltic countries. Russia's role in mutual trade, by contrast, is declining. This proves that European and Baltic companies are enjoying mutual advantage as the economy orients itself toward work in European markets.

When the Baltic States join the EU, they will become a frontier for the union - the eastern border of the Baltic States will be the eastern border of the EU, set up against the economic space which Russia and its confederate countries are establishing. By forming the external boundary of the EU, the Baltic States, along with Poland and Hungary, will have a more important role to play in defending the European common market.

From the perspective of European security, too, the Baltic States will have a critical role to play in terms of hard and soft security. It is in the interests not only of Latvia, Lithuania and Estonia, but also of the EU, to ensure that the Baltic region is a safe environment for democratic processes. This reduces the possibility of military threats and international tensions. In terms of soft security, the achievements which the Baltic States have reached in reducing corruption and red tape have served to create a good groundwork for a secure investment environment - something that is a critical prerequisite for further integration between EU member states and the Baltic States. The enlargement of NATO and the EU's initiatives in setting up a European common defence policy are also placing increasing responsibility on the new member states when it comes to regional security. That is why the process of improving defence and security systems in the Baltic States in line with the EU's acquis communautaire is very important in terms of preparing for the duties of an EU member state.


The experience of the Baltic States in dealing with nationality issues - unique experience for all of Europe

The Soviet occupation not only kept the Baltic States from developing along with other European countries under conditions of democracy, it also left the three countries with a very serious ethnic situation. Russification and industrialisation of the Baltic region led to vast immigration of other nationalities into the Baltic republics from Russia and other parts of the Soviet Union. In the early 1990s, for example, ethnic Latvians made up only 52% of the country's population. Despite the fact that the Baltic States enjoy Nordic calm, and their societies are generally tolerant toward other ethnic groups, a very critical boundary was approaching in terms of maintaining ethnic identity. This could have created the threat of explosive situations among various ethnic groups at the time when the Baltic States were casting off the influence of the Soviet Union, when the Soviet armed forces were withdrawn, and later. Despite the complex situation, however, the Baltic States have managed to balance the interests of various ethnic groups peacefully and in the spirit of mutual understanding. Policies regarding language and the integration of society drew counter-reactions initially, but in the end they served as a basis for consolidation in the Baltic societies. Today nationality issues are no longer on the political agenda of the Baltic States. A legal foundation and public understanding have emerged when it comes to the need to establish consolidated societies. In the context of the new Europe, the Baltic States have set an example in the peaceful coexistence of various ethnic groups, and this experience can be useful in dealing with nationality issues in such European hot spots as the former Yugoslavia and its constituent parts.


The role of the Baltic region and its opportunities in the EU

The Baltic States are located in a region that is both politically and economically active. They are at a crossroads between Northern and Central Europe, as well as between the easternmost parts of Russia and the westernmost parts of Europe. The geographic placement of the three countries, as well as the fact that they have seaports that are ice-free all year round, are the things which really dictate the region's role as a bridge between Russia and the rest of Europe. The Baltic States are something of a "mouth", through which sea transport, transit pipelines, railroads and roads pass, connecting Russia with the rest of the world. This makes the region very important in the export of Russian oil products, as well as in the sale of potassium, wood and chemicals. The food industry is also important, as its share in the regional economy will only increase as Russia's economy expands and the purchasing power of Russia's residents strengthens. The Baltic States, indeed, can become a centre for logistics and distribution in the whole region.

Although Russia and the other countries of the CIS have started down the path of reform, they all face unpredictable political situations, economic crises, frequent changes in law and an unusual business mentality which serve to create an insecure business environment that scares off entrepreneurs from the European Union when it comes to doing business in Russia and the CIS. Businesspeople in the Baltic States, however, have extensive experience and know-how in Russia, and they can maintain economic contacts even in the wake of that country's massive economic crisis. Traditional contacts make it easier for EU businesses, too, to access the Russian market.

Scandinavian companies took note of the advantages of the Baltic States relatively more quickly than most EU member states did. Scandinavian capital is taking over an increasing share of the Baltic market in such areas as banking and finances, manufacturing and retail sales. Integration between the economies of the Scandinavian countries and the Baltic States allow us to predict that the Northern European region - including those countries which surround the Baltic Sea - will eventually become the most rapidly growing region in Europe, as well as a region which undergoes rapid development at the global level.


Cooperation among the Baltic states and Latvia as an advocate of Baltic unity

There are relatively few residents in Estonia, Latvia and Lithuania, and this serves to limit economic development in purely domestic terms.

With the aim of expanding market opportunities, the Baltic States in 1993 concluded a free trade agreement which led to a dismantling of customs barriers and the creation of a unified economic space. This was a political step of great importance, because the integration of the three Baltic economies moved forward very significantly. Manufacturers gained easier access to neighbouring markets, and conditions were set up for free capital flow across boundaries. This approach made the joint Baltic economy power powerful and competitive.

Latvia has always been an advocate of unity among the Baltic States, because the economic role of the three countries increases, and they become more attractive for investments, when common economic opportunities and market integration expand. Latvia, therefore, is continuing to pursue policies which seek to eliminate the various factors which can hinder the business environment in the three countries. The three Baltic parliaments have set up the Baltic Assembly - the highest political in which politicians from Estonia, Lithuania and Latvia take part. This mechanism makes it possible to harmonise national policies and to work on joint infrastructure projects. This, in turn, stimulates the Baltic economies and improves the business environment.

When it comes to integration into the European Union, Latvia has also favoured the simultaneous admission of all three Baltic States to the EU. The EU's decision to eliminate the process in which candidate countries were divided up into groups certainly increases the possibility that this will happen. The pace of integration of the various candidate countries depends on political will and a readiness to undertake reforms. The process of reform has differed in the Baltic States - Estonia has implemented faster economic restructuring and privatisation policies, Latvia has moved ahead more quickly on human rights and language issues, and Lithuania has worked very hard on bringing its defence system in line with NATO requirements. Overall, however, the pace and nature of reform have been very similar in the three countries, as have economic development processes. If the three Baltic States were admitted to the European Union at different times, this would unquestionably lead to complications and greater costs in mutual trade among the three countries. The Baltic States must seek to catch up with one another in various aspects of the reform process in order to avoid this and join the EU together.

All three Baltic States must deal with the same challenges in preparing for EU membership - harmonisation of laws with EU laws, modernisation of public administration systems, and increased economic competitiveness.

Latvia's experience shows that institutional reform of public administration is a critically important factor in EU integration, the aim being to set up a civil service and related institutions which can implement and supervise the acquis communautaire and also implement EU laws in a way which is understandable to members of the public. Restructuring, which Latvia has done in its central administrative system and in the various ministries, has led to significantly increased capacity and quality, but the changes which have been made in order to strengthen the central administrative apparatus have not been far-reaching enough. If the country is to undergo harmonic development and make full use of its comparative advantages and the opportunities which globalisation affords, the country must set up powerful and modern administrative structures in local governments and in the country's regions. This is a process of reform which is still largely in the future for Latvia and the other Baltic States.


A knowledge-based society

The Baltic market is comparatively small, there are limited numbers of workers, and the three countries are not rich in natural resources. This means that the traditional script for economic development - one which is based on the production of low added-value and the rational use of natural resources - is not applicable if the Baltic States are to develop quickly.

Latvia believes that the establishment of an educated society and a competitive labour force is the main factor in ensuring competitiveness in economic development. Latvia has long-standing traditions in education and science which have served as a foundation for high educational standards in the country. Latvia is among the world's leaders in terms of the share of the national population with a completed higher education. The new economy in Latvia will be based on the intensive use of knowledge and high technologies, emphasising a knowledge-based economy in place of a labour-intensive economy.

Computerisation and the rapid development of information technologies have allowed professionals from Latvia, Estonia and Lithuania to find their niche in the world. The political ambitions of the Baltic States to draw closer to the developmental level of the EU's member states have stimulated the process of adapting more quickly to the opportunities which the e-world and related IT development afford. In the next five years the Baltic States can become a true frontier for the e-economy in Europe. Estonia already has among the highest per capita computerisation indicators in all Europe. Latvia's experience in linking various national information systems and registers in a unified megasystem is unique on the continent. Since Soviet times the Baltic States have been developing traditions in IT education and science, which means that our societies have many IT specialists who can serve as a cornerstone for e-economy development in the Baltic region. Laws in the e-sector are being drafted to adopt the latest norms of the world's developed countries, and the telecommunications infrastructure is being rebuilt, making use of the most modern available technologies in this process. All of this is leading to the emergence of a modern and dynamic environment which serves as a basis for the successful development of other economic sectors. It may seem a paradox, but it is a fact of life that small economies have distinct advantages in various e-projects. Small countries have an easier time in reaching agreement among various government and private interests in this process. All of this means that the Baltic States have every opportunity to become a breeding ground for new and non-traditional economic opportunities.


Baltic integration into the EU - of interest to all of Europe

This is unquestionably a period of historical opportunity for the Baltic States, along with other countries in Eastern and Central Europe. The design, construction and reconstruction of these countries are all occurring at the same time. This is an era in which the development of countries and regions is no longer a closed and narrow process - today they are occurring in a transnational and global context.

This is a period of challenges, but it is also a period of opportunities. Making use of these opportunities is of interest to all of Europe, so that we can ensure the long-term security and stability of the region, and so that we change Europe, making it more powerful and open in international trade and enriching it in terms of cultural variety.

It is entirely in our power to make full use of these opportunities.